The Real Effects of Environmental Activist Investing

Does Socially Responsible Investing Change Firm Behavior?

“…Our paper also relates to the broad literature on the effects of institutional investors (see Edmans and Holderness (2017) for a complete survey of the literature), and in particular investors interested in environmental and social issues. Chu and Zhao (2019), Akey andAppel (2019), andNaaraayanan, Sachdeva, andSharma (2020) find that firms targeted by activist investors improve environmental behavior. 11 Azar, Duro, Kadach, and Ormazabal (2020) find that the Big 3 passive fund families concentrate their engagement activities in large portfolio firms with higher emissions.…”

Public Environmental Enforcement and Private Lender Monitoring: Evidence from Environmental Covenants

“…Prior research has studied the environmental impacts of various firm characteristics, such as financial constraints (Kim and Xu 2021), ownership structure (Shive and Forster 2020), parent company environmental liability exposure (Akey and Appel 2021), and environmental auditors (Duflo et al 2013) or insurers (Boomhower 2019). In addition, a few recent studies have taken steps in understanding how stakeholders, such as shareholders (Dimson et al 2015;Dyck et al 2019;Akey and Appel 2020;Krueger et al 2020), customers (Schiller 2018;Dai et al 2020), and environmental activists (Naaraayanan et al 2020), actively engage in corporate ESG practices. Our paper advances this stream of literature by studying the active monitoring role lenders play in shaping borrowers' environmental activities and how lender monitoring is affected by public environmental enforcement.…”

Limits to Private Climate Change Mitigation

“…Investors concerned about climate change can directly focus on emissions growth to evaluate both these firms and asset management products that incorporate them. Naaraayanan, Sachdeva & Sharma (2020) show that some sophisticated investors have already conditioned activism campaigns on measures of potential future emissions rather than ESG scores. Such approaches do continue to face important challenges, highlighting the need to continue to build consensus towards effective economy-wide policies to address climate change.…”

“…While there is now a large literature on ESG investing, the literature examining firm-level emissions is more sparse as researchers have found obtaining comprehensive datasets, with comparable coverage for large panels of firms with reasonable time series, challenging. Three recent studies rely on emissions data collected by the US Environmental Protection Agency: Naaraayanan et al (2020) show that activist campaigns can help reduce ancillary toxic and greenhouse gas emissions, but find no effect on carbon emissions or production; Ivanov, Kruttli & Watugala (2020) explore the impact of new regulations on bank lending terms; and Shive & Forster (2020) study the link between ownership structures and emissions. 9 Several researchers have worked with voluntary disclosures collected by the Carbon Disclosure Project, examining implications for financial markets as well as firms' own actions (Ilhan, Sautner & Vilkov 2021, Bolton & Kacperczyk 2020a, Bolton & Kacperczyk 2020b, Ioannou, Li & Serafeim 2016.…”